ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For
the fiscal year ended September 30, 2010

or

o

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For
the transition period from
______ to ______

Commission
File Number 0-24012

DEEP
WELL OIL & GAS, INC.

(Exact
name of registrant as specified in its charter)

Nevada

13-3087510

(State
or other jurisdiction of incorporation or organization)

(I.R.S.
Employer Identification No.)

Suite
700, 10150 – 100 Street, Edmonton, Alberta, Canada

T5J
0P6

(Address
of principal executive offices)

(Zip
Code)

Registrant’s
telephone number, including area code: (780) 409-8144

Securities
registered under Section 12(b) of the Act:

Title
of each class

Name
of each exchange on which registered

None

None

Securities
registered under Section 12(g) of the Act:

Common
Stock, $0.001 par value per share

(Title
of class)

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.

Yes o No þ

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No o

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
o No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.

Large
accelerated filer o

Accelerated
filer o

Non-accelerated
filer o (Do not
check if a smaller reporting company)

Smaller
reporting company þ

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No þ

The
aggregate market value of the registrant’s common stock held by non-affiliates
computed by reference to the price at which the common equity was sold on March
31, 2010 was approximately $4.8 million.

As of
November 26, 2010, the Issuer had approximately 136,059,971 shares of common
stock, $0.001 par value per share outstanding.

API – a scale developed by the
American Petroleum Institute for measuring the density or gravity (heaviness) of
oil; the higher the number, the lighter the oil.

Barrel – the common unit for
measuring petroleum, including heavy oil. One barrel contains approximately 159
L.

Battery – equipment to process
or store crude oil from one or more wells.

Bbl or Bbls – means barrel or
barrels.

Bitumen – a heavy, viscous
form of crude oil that generally has an API gravity of less than 10
degrees.

Cdn – means Canadian
dollars.

Celsius – a temperature scale
that registers the freezing point of water as 0 degrees and the boiling point as
100 degrees under normal atmospheric pressure. Room temperature is between 20
degrees and 25 degrees Celsius.

Cold Flow – a production
technique where the oil is simply pumped out of the sands not using a Thermal
Recovery Technique.

Conventional Crude Oil – crude
oil that flows naturally or that can be pumped without being heated or
diluted.

Core – a cylindrical rock
sample taken from a formation for geological analysis.

Crude Oil – oil that has not
undergone any refining. Crude oil is a mixture of hydrocarbons with small
quantities of other chemicals such as sulphur, nitrogen and oxygen. Crude oil
varies radically in its properties, namely specific gravity and
viscosity.

Cyclic Steam Stimulation
(“CSS”) – a thermal in situ recovery method, which consists of a three-stage
process involving high-pressure steam injected into the formation for several
weeks. The heat softens the oil while the water vapor helps to dilute and
separate the oil from the sand grains. The pressure also creates channels and
cracks through which the oil can flow more easily to the well. When a portion of
the reservoir is thoroughly saturated, the steam is turned off and the reservoir
“soaks” for several weeks. This is followed by the production phase, when the
oil flows, or is pumped, up the same wells to the surface. When production rates
decline, another cycle of steam injection begins. This process is sometimes
called “huff-and-puff” recovery.

Darcy (Darcies) – a measure of
rock permeability (the degree to which natural gas and crude oil can move
through the rocks).

Density – the heaviness of
crude oil, indicating the proportion of large, carbon-rich molecules, generally
measured in kilograms per cubic metre (kg/m3) or degrees on the American
Petroleum Institute (API) gravity scale.

Development Well – a well
drilled within a proven area of a natural gas or oil reservoir to the depth of a
stratigraphic horizon known to be productive.

Diluents – light
petroleum liquids used to dilute bitumen and heavy oil so they can flow through
pipelines.

Drill Stem Test (“DST”) – a
method of formation testing. The basic drill stem test tool consists of a packer
or packers, valves or ports that may be opened and closed from the surface, and
two or more pressure-recording devices. The tool is lowered on the drill string
to the zone to be tested. The packer or packers are set to isolate the zone from
the drilling fluid column.

Drill String – the column, or
string, of drill pipe with attached tool joints that transmits fluid and
rotational power from the kelly to the drill collars and the bit. Often, the
term is loosely applied to include both drill pipe and drill
collars.

Enhanced Oil Recovery – any
method that increases oil production by using techniques or materials that are
not part of normal pressure maintenance or water flooding operations. For
example, natural gas can be injected into a reservoir to “enhance” or increase
oil production.

Exploratory Well – a well
drilled to find and produce natural gas or oil in an unproven area, to find a
new reservoir in a field previously found to be productive of natural gas or oil
in another reservoir, or to extend a known reservoir.

Farmout – an arrangement
whereby the owner (the “Farmor”) of a lease assigns some portion (or all) of the
lease(s) to another company (the “Farmee”) for drilling in return for the Farmee
paying for the drilling on at least some portion of the lease(s) under the
Farmout.

Gross Acre/Hectare – a gross
acre is an acre in which a working interest is owned. 1 acre = 0.404685
hectares.

Heavy Oil – oil having an API
gravity less than 22.3 degrees.

4

Horizontal Well – the drilling
of a well that deviates from the vertical and travels horizontally through a
producing layer.

In situ – In the oil sands
context (In situ means
“in place” in Latin), In
situ methods such as SAGD or CSS through horizontal or vertical wells are
required if the oil sands deposits are too deep to mine from the
surface.

Lease – a legal document
giving an operator the right to drill for or produce oil or gas; also, the land
on which a lease has been obtained.

License of Occupation (“LOC”)
– a surface crown agreement issued by the Alberta Department of
Sustainable Resources Development granting the mineral producer the right to
occupy public lands for an approved purpose, usually issued primarily for access
roads or to construct access roads, but may also be issued for other
purposes.

Light Crude Oil – liquid
petroleum which has a low density and flows freely at room temperature. Also
called conventional oil, it has an API gravity of at least 22 degrees and a
viscosity less than 100 centipoise (cP).

Mineral Surface Lease (MSL) –
a surface crown agreement issued by the Alberta Department of Sustainable
Resources Development granting the mineral producer the right to construct a
well site on publicly owned land.

Net Acre/Hectare – a net acre
is the result that is obtained when fractional ownership working interest is
multiplied by gross acres.

Oil Sands – naturally
occurring mixtures of bitumen, water, sand and clay that are found mainly in
three areas of Alberta - Athabasca, Peace River and Cold Lake. A typical sample
of oil sand might contain about 12% bitumen by weight.

Pay Zone (Net Oil Pay) – the
producing part of a formation.

Permeability – the capacity of
a reservoir rock to transmit fluids; how easily fluids can pass through a rock.
The unit of measurement is the darcy or millidarcy.

Porosity – the capacity of a
reservoir to store fluids, the volume of the pore space within a reservoir,
measured as a percentage.

Primary Recovery – the
production of oil and gas from reservoirs using the natural energy available in
the reservoirs and pumping techniques.

Saturation – the relative
amount of water, oil, and gas in the pores of a rock, usually as a percentage of
volume.

SEC – means United States
Securities and Exchange Commission.

Section – in reference to a
parcel of land, meaning an area of land comprising approximately 640
acres.

Solution Gas – natural gas
that is found with crude oil in underground reservoirs. When the oil comes to
the surface, the gas expands and comes out of the solution.

Steam-Assisted Gravity Drainage
(“SAGD”) – pairs of horizontal wells (an upper well and a lower well) are
drilled into an oil sands formation and steam is injected continuously into the
upper well. As the steam heats the oil sands formation, the bitumen softens and
drains into the lower well, from which it is brought to the
surface.

Thermal Recovery – a type of
improved recovery in which heat is introduced into a reservoir to lower the
viscosity of heavy oils and to facilitate their flow into producing wells. The
pay zone may be heated by injecting steam (steam drive) or by injecting air and
burning a portion of the oil in place (in situ combustion).

Upgrading – the process that
converts bitumen and heavy oil into a product with a density and viscosity
similar to conventional light crude oil.

Viscosity – a measure of a
fluids resistance to flow. To simplify, the oil’s viscosity represents the
measure for which the oil wants to stay put when pushed (sheared) by moving
mechanical components. It varies greatly with temperature. The more viscous the
oil the greater the resistance and the less easy it is for it to flow.
Centipoise (cp) is the common unit for expressing absolute viscosity. Viscosity
matters to producers because the oil’s viscosity at reservoir temperature
determines how easily oil flows to the well for extraction.

5

CURRENCY
EXCHANGE RATES

Our
functional currency is the US dollar, therefore our accounts are reported in
United States dollars. However, our Canadian subsidiaries maintain their
accounts and records in Canadian dollars (“Cdn”). As a result, all dollar
amounts herein are stated in United States dollars except where otherwise
indicated.

The
following table sets forth the rates of exchange for the Canadian dollar,
expressed in US dollars, in effect at the end of the following periods and the
average rates of exchange during such periods, based on the noon rates of
exchange for such periods as reported by the Bank of Canada.

Year ending September 30,

2010

2009

2008

2007

Rate
at end of year

$

1.0298

$

1.0722

$

1.0599

$

0.9963

Average
rate for the year

$

1.0407

$

1.1804

$

1.0092

$

1.1132

Unless
the context indicates another meaning, the terms the “Company,” “we,” “us” and
“our” refer to Deep Well Oil & Gas, Inc. and its subsidiaries. For
definitions of some terms used throughout this report, see “Glossary and
Abbreviations”.

PART
I

ITEM 1.

BUSINESS

We are an
emerging independent junior oil and gas exploration and development company
headquartered in Edmonton, Alberta, Canada. Our immediate corporate focus is to
develop the existing oil sands land base that we presently own in the Peace
River oil sands area in North Central Alberta. Our principal office is located
at Suite 700, 10150 – 100 Street, Edmonton, Alberta T5J 0P6, our telephone
number is (780) 409-8144 and our fax number is (780) 409-8146. Deep Well Oil
& Gas, Inc. is a Nevada corporation and our common stock trades on the OTCQB
marketplace under the symbol DWOG. We maintain a web site at www.deepwelloil.com.
The contents of our website are not part of this form 10-K.

Business
Development

Deep Well
Oil & Gas, Inc. (hereinafter referred to as “Deep Well”) was originally
incorporated on July 18, 1988 under the laws of the state of Nevada as Worldwide
Stock Transfer, Inc. On October 25, 1990, Worldwide Stock Transfer, Inc. changed
its name to Illustrious Mergers, Inc. On June 18, 1991, a company known as
Allied Devices Corporation was merged with and into Illustrious Mergers, Inc.
and its name was at that time changed to Allied Devices Corporation. On August
19, 1996, a company called Absolute Precision, Inc. was merged with and into
Allied Devices Corporation and it retained its name as Allied Devices
Corporation.

On
February 19, 2003, Allied Devices Corporation filed a Petition for Relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court in
and for the Eastern District of New York titled In re: Allied Devices Corporation,
et al., Chapter 11, Case No. 03-80962-511 (hereinafter referred to as the
“Bankruptcy Action”).

On
September 10, 2003, after notice to all creditors and a formal hearing, U.S.
Bankruptcy Judge Melanie L. Cyganowski issued an “Order Confirming Liquidating
Plan of Reorganization” in the Bankruptcy Action (hereinafter referred to as
“Bankruptcy Order”). In conjunction with that Bankruptcy Order, Allied Devices
Corporation’s (hereinafter referred to as the “Predecessor Company”)
liabilities, among other things, were paid off and extinguished. The Bankruptcy
Order, among other things, implemented a change of control and a group of new
investors took control of the Predecessor Company and changed its name to Deep
Well Oil and Gas, Inc.

Upon
emergence from Chapter 11 proceedings, Deep Well adopted fresh-start reporting
in accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, Financial Reporting By Entities in Reorganization
Under the Bankruptcy Code (SOP 90-7). For financial reporting purposes, Deep
Well adopted the provisions of fresh-start reporting effective September 10,
2003. All periods presented prior to September 10, 2003, have been designated
Predecessor Company.

On April
26, 2004, Northern Alberta Oil Ltd. (formerly known as Mikwec Energy Canada,
Ltd., hereinafter referred to as “Northern” and later acquired by Deep Well)
signed a Joint Operating Agreement with Pan Orient Energy Corp. (formerly known
as Maxen Petroleum Inc. hereinafter referred to as “Pan Orient”) to provide for
the manner of conducting operations on 3 Peace River oil sands development
leases for a total of 32 sections covering 20,243 gross acres (8,192 gross
hectares). The 32 sections were acquired jointly on April 23, 2004, with
Northern having an 80% working interest and Pan Orient having a 20% working
interest in the joint lands.

6

On August
18, 2004, Deep Well and Pan Orient jointly participated in a public offering of
Crown Oil Sands Rights held by the Alberta Department of Energy, in which the
joint parties successfully bid on 3 Peace River oil sands development leases for
a total of 31 sections covering 19,610 gross acres (7,936 gross hectares). Deep
Well acquired an undivided 80% working interest and Pan Orient acquired an
undivided 20% working interest in the joint property.

On
December 9, 2004, Deep Well signed a Joint Operating Agreement with 1132559
Alberta Ltd. (hereinafter referred to as “1132559”) under which 1132559
acknowledged the terms under which their 10% working interest acquired from Pan
Orient in the joint lands covering 3 Peace River oil sands development leases
for a total of 31 sections, which Pan Orient acquired on April 23, 2004, would
be governed.

On
February 25, 2005, Deep Well and Northern signed a farmout agreement
(hereinafter referred to as the “Farmout Agreement”) with Surge Global Energy,
Inc. (hereinafter referred to as “Surge US”) and Signet Energy Inc. (formerly
known as Surge Global Energy Canada Ltd., and hereinafter referred to as
“Signet”) (collectively, “Surge”). Signet subsequently merged with 1350826
Alberta Ltd. a wholly owned subsidiary of Andora Energy Corporation, and
subsequently 1350826 Alberta Ltd. amalgamated with Andora Energy Corporation
(hereinafter referred to as “Andora”, a company approximately 53% owned by Pan
Orient). This agreement allowed Surge to earn up to a 40% working interest in
the farmout lands (50% of our share). Among other things the agreement called
for Surge to drill 10 wells, pay $2,000,000 (less expenses related to a
financing) as a prospect fee payable as ninety percent (90%) to Northern and ten
percent (10%) to Deep Well, and grant us, in the same proportions, 33.33% of the
shares of Surge US outstanding on the day the agreement was signed.

On March
3, 2005, Deep Well, Northern and Surge mutually agreed by an amending agreement
to extend the payment date of the prospect fee under Article 13 of the Farmout
Agreement dated February 25, 2005, whereby Surge was granted an extension for
payment of the prospect fee to the closing date of March 18, 2005.

On March
10, 2005, Deep Well, Northern and Surge mutually agreed by an amending agreement
that Surge US is only a party to the Farmout Agreement for the purposes of
Article 14 of the Farmout Agreement dated February 25, 2005.

On March
10, 2005, Deep Well, Northern and Surge mutually agreed by an amending agreement
to establish a procedure whereby Signet is to be appointed as the operator under
the existing Joint Operating Agreements in respect of all Farmout Lands in which
Signet earns an interest pursuant to Article 7 of the Farmout Agreement dated
February 25, 2005.

On June
7, 2005, Deep Well acquired 100% of the common shares of Northern in exchange
for 18,208,875 shares of Deep Well’s common stock. Under the terms of the
agreement, Deep Well acquired one hundred percent (100%) of Northern’s issued
and outstanding common stock and obtained exclusive options to acquire one
hundred percent (100%) of Northern’s preferred stock. The agreement provided
that one hundred percent (100%) of Northern’s common and preferred shareholders
would exchange their Northern shares for newly issued shares of Deep Well’s
restricted common stock. Deep Well, through its acquisition of Northern,
acquired a net 80% working interest in 3 Peace River oil sands development
leases, 1 oil sands permit and 1 petroleum and natural gas license for a total
of 38.5 sections covering 24,355 gross acres (9,856 gross hectares). Through
this acquisition our Company has more than doubled its acreage position in the
Peace River oil sands to 43,965 gross acres (17,792 gross hectares). Of the
total acreage, 6.5 sections are classified as the oil sands permit and petroleum
and natural gas license, and were encumbered by an injunction related to a court
proceeding involving Classic Energy Inc., (hereinafter referred to as
“Classic”), the company Northern acquired this acreage from. This permit and
license have now been released and as of November 15, 2005, were transferred to
Northern.

On July
14, 2005, our Company and Surge mutually agreed to amend the Farmout Agreement
dated February 25, 2005 in order to extend the date to spud the first well until
September 25, 2005.

On
September 15, 2005, Deep Well Oil & Gas (Alberta) Ltd. (hereinafter referred
to as “Deep Well Alberta”), a 100% wholly owned subsidiary company of Deep Well,
was incorporated in the province of Alberta, Canada. Deep Well Alberta was
incorporated in order to hold Deep Well’s Canadian oil sands leases it acquired
on August 18, 2004, other than the oil sands leases already held by Northern. At
the time, Deep Well owned 100% of the common shares of Northern but not the
preferred shares of Northern.

On
September 21, 2005, Signet was granted a permit by the Energy Resources
Conservation Board (hereinafter referred to as the “ERCB”) for a test well, and
on September 28, 2005, Signet began drilling our first well 1-36-091-13W5
(hereinafter referred to as “1-36”) at Sawn Lake, Alberta Canada. Signet did not
spud the first well by the 25th of
September 2005 and we noted them in default of the Farmout
Agreement.

In
October 2005, the ERCB granted our farmout partner and operator, Signet, an
amendment to the original test well permit at Sawn Lake, Alberta Canada, to
proceed with the drilling of our first well of our Sawn Lake
Project.

7

On
November 15, 2005, as part of the settlement of the litigation as described in
this report, we agreed to amend the Farmout Agreement signed on February 25,
2005 between our Company and Surge that had previously been terminated by Deep
Well (as previously disclosed on Form 8-K on September 29, 2005). The amendments
to the agreement provided that: 1.) all conditions of the Farmout Agreement will
be deemed to have been satisfied on September 25, 2005; 2.) the earning period
(the period during which Signet has to drill 10 wells) under the agreement will
be extended until February 25, 2008; 3.) Signet will have until September 25,
2006 to drill an option well (the second well); 4.) an additional 6.5 sections
of land will be added to the land subject to the agreement; 5.) Signet will pay
Deep Well $1,000,000 on November 15, 2005 in satisfaction of the prospect fee
outstanding instead of after drilling the second well as stated in the Farmout
Agreement; and 6.) no shares of Surge US will be issued to Deep Well or
Northern, instead we will receive 7,550,000 common shares of Signet, a private
subsidiary company of Surge US.

On July
17, 2006, Signet had received the required licenses by the Government of Alberta
to drill the next 3 horizontal wells in the Bluesky Formation of the Sawn Lake
Heavy oil sands project. The next 3 wells drilled were within less than one mile
(1.6 km) of the first test well that was already drilled. These surface
locations were 4-32-091-12W5 (hereinafter referred to as “4-32”), 7-30-091-12W5
(hereinafter referred to as “7-30”) and 13-29-091-12W5 (hereinafter referred to
as “13-29”). Seismic and reservoir mapping were undertaken to be used to support
and progress work on near and long-term plans of development for the Sawn Lake
heavy oil project. For further information on drilling and results see “Present
Activities” under Item 2 “Oil and Gas Properties” herein described in this
report.

In
October 2006, the 4-32 and 7-30 wells along with the 1-36 well were suspended.
Signet had undertaken a mapping of the reservoir to assist in its delineation
for any future development of the Sawn Lake property. The first three wells were
drilled in the most heavily documented portion of the Sawn Lake lands. Although,
as indicated by Signet, the preliminary results from the last 2 wells indicated
a lack of cold flow production from well 4-32 and 7-30, the compartmentalized
nature of the reservoir and varying characteristics of these compartments may
show different results with further evaluation. Our Company felt that the level
of testing on these wells to determine their complete potential was
deficient.

On
September 11, 2007, we exercised our dissenting rights at Signet’s special
meeting of shareholder's held in Calgary, Alberta with respect to the
amalgamation between Signet and Andora. Our Company reserved its right to file a
Notice of Motion with the Court of Queen’s Bench of Alberta, Canada as a step
towards enforcing our rights to dissent. On November 19, 2008, we entered into
an arrangement whereby Deep Well’s subsidiaries, Deep Well Alberta and Northern,
exchanged their 755,000 and 6,795,000 common shares of Signet respectively into
224,156 and 2,017,402 common shares of Andora respectively.

On
November 26, 2007, we entered into mediation with Signet and resolved our
differences and certain collateral matters. The settlement included but is not
limited to:

·

the
Farmout Agreement dated February 25, 2005, being effectively terminated
concurrently with the execution of the settlement agreement;
and

·

Signet
being regarded as having earned the two sections on which the option wells
were drilled and 4 additional sections as set out in the Settlement;
and

·

Signet
being required to reconvey registered title to 57.5 unearned sections of
the Farmout Lands, as defined in the Farmout Agreement, back to us;
and

·

our
Company having the right to retest, at no cost to Signet, the option wells
previously drilled.

On March
18, 2008, the 6.5 section oil sands permit, which was originally scheduled to
expire on April 9, 2008, was extended for one year pursuant to an application
submitted by Northern to the Alberta Department of Energy .

On
September 10, 2008, the ERCB granted us well licenses to drill 6 wells on our
Sawn Lake oil sands properties.

On
December 1, 2008, in conjunction with our 2008/2009 winter drilling program, we
acquired 2 vertical wells and existing road infrastructure from Paramount
Resources Ltd. (“Paramount”) through a transfer of title. These existing roads
total 12km of access on our Sawn Lake property and 1 of the wells was
subsequently transferred to our oil sands lease.

On
December 4, 2008, we successfully spudded the first well of six wells to be
drilled in our 2008/2009 Sawn Lake winter drilling program in the Peace River
oil sands area of Alberta. By early February of 2009, we successfully drilled
all planned 6 wells of our Sawn Lake oil sands project.

On
February 1, 2009, Northern acquired another existing access road on our Sawn
Lake properties from Penn West Petroleum Ltd., adding 8.7 km of roads to its
Sawn Lake infrastructure.

In
September of 2009, we submitted an application (hereinafter referred to as the
“CSS Application”) to the ERCB for a commercial bitumen recovery scheme to
evaluate the 12-14-092-13W5 well for potential development using Cyclic Steam
Stimulation (“CSS”), and later we added the 6-22-092-13W5 well to the
application.

On
October 14, 2010, our CSS Application was approved by the ERCB to conduct one
CSS production test on one of the wells to evaluate the oil sands resource using
this secondary recovery technology. The Company has appointed Asher Engineering
Ltd. to manage the CSS project and construction, including procurement of all
required equipment.The
CSS process involves steam injection into a well for a period of up to 30 days,
potentially a ”soaking” period, followed by production of heavy oil for up to 50
days or more. This CSS production test is not only for the production of heavy
oil from the Blue Sky zone of the Sawn Lake project but it will also aid in
quantifying proven reserves of oil.

On
November 9, 2010 we secured two private placement financings for $2,050,000. The
Company intends to use the majority of the net proceeds from the private
placements to conduct engineering, construction and other operations for its
recently approved CSS production test.

Currently,
Deep Well and its subsidiaries, Northern and Deep Well Alberta, have an 80%
working interest in 56 contiguous sections of oil sands development leases, and
a 40% working interest in an additional 12 contiguous sections of oil sands
development leases in the Peace River oil sands area of Alberta, Canada. Our oil
sands leases cover 43,015 gross acres (17,408 gross hectares). The focus of our
Company’s operations is to define the heavy oil reservoir to establish reserves
and to determine the best technology under which oil can be produced from the
Sawn Lake project in order to initiate production and generate a cash
flow.

Principal
Product

At this
time, our primary interest is the exploration for and production of oil in the
Peace River oil sands area located in North Central Alberta, Canada. We are
engaged in the identification, acquisition, exploration and development of oil
& gas prospects. Our immediate focus is the oil sands leases we hold in the
Peace River oil sands area. Our main objective is to develop our existing oil
sands land holdings as well as identify and develop other commercially viable
oil & gas properties. Exploration and development for commercially viable
production of any oil and gas company includes a high degree of risk which
careful evaluation, experience and factual knowledge may not eliminate.
Currently we have no production from our properties.

Market and Distribution of
Product

We
anticipate our principal target market to be refiners, remarketers and other
companies, some of which have pipeline facilities near our properties. In the
event pipeline facilities are not conveniently available, we intend to truck our
oil to alternative storage, refining or pipeline facilities. In such a case, if
our production was enough to justify our own pipeline facilities we would
consider building them.

We intend
to sell our oil and gas production under both short-term (less than one year)
and long-term (one year or more) agreements at prices negotiated with third
parties. Under both short-term and long-term contracts, typically either the
entire contract (in the case of short-term contracts) or the price provisions of
the contract (in the case of long-term contracts) are renegotiated inintervals
ranging in frequency from daily to annual. At this time we have no production
and therefore no short-term or long-term contracts. We will adopt specific sales
and marketing plans once production is achieved.

Market
pricing for bitumen is seasonal, with lower prices in and around the calendar
year-end being the norm due to lower demand for asphalt and other
bitumen-derived products. By necessity, bitumen is regularly blended with
diluent in order to facilitate its transportation via pipeline to North American
markets. As such, the effective field price for bitumen is also directly
impacted by the input cost of the diluent required, the demand and price of
which is also seasonal in nature (higher in winter as colder temperatures
necessitate more diluent for transportation). Consequently, bitumen pricing is
notoriously weak in and around December 31 and not reflective of the annual
average realized price or the economics of the “business” overall. We have been
advised that, to price bitumen, marketers apply formulas that take as a
reference point the prices published for crude oil of particular qualities such
as “Edmonton light”, “Lloydminster blend”, or the more internationally known
“West Texas Intermediate” (hereinafter referred to as “WTI”). We also understand
that the price of bitumen fluctuates widely during the course of a year, with
the lowest prices typically occurring at the end of the calendar year because of
decreased seasonal demand for asphalt and other bitumen-derived products coupled
with higher prices for diluents added to facilitate pipeline transportation of
bitumen.

9

The price
of oil and natural gas sold is determined by negotiation between buyers and
sellers. An order from the National Energy Board (hereinafter referred to as
“NEB”) is required for oil exports from Canada. Any oil export to be made
pursuant to an export contract of longer than one year in the case of light
crude, and two years in the case of heavy crude, requires an exporter to obtain
an export license from the NEB. The issue of such a license requires the
approval of the Government of Canada. Natural gas exported from Canada is also
subject to similar regulation by the NEB. Natural gas exports for a term of less
than two years, or for a term of two to twenty years in quantities of not more
than 20,000 mcf per day, must be made pursuant to an NEB order. Any natural gas
exports to be made pursuant to a contract of larger duration (to a maximum of 25
years) or in larger quantities require an exporter to obtain a license from the
NEB, which requires the approval of the Government of Canada. Exporters are free
to negotiate prices and other terms with purchasers provided that the export
contracts meet certain criteria prescribed by the NEB. The government of Alberta
also regulates the volume of natural gas, which may be removed from the province
for consumption elsewhere based on such factors as reserve availability,
transportation arrangements and market considerations.

Competitive Business
Conditions

We
operate in a highly competitive environment, competing with major integrated and
independent energy companies for desirable oil and natural gas properties as
well as for the equipment, labour and materials required to develop and operate
those properties. Many of our competitors have longer operating histories and
substantially greater financial and other resources greater than ours. Many of
these companies not only explore for and produce crude oil and natural gas, but
also carry on refining operations and market petroleum and other products on a
worldwide basis. Our larger competitors, by reason of their size and relative
financial strength, can more easily access capital markets than we can and may
enjoy a competitive advantage, whereas we may incur higher costs or be unable to
acquire and develop desirable properties at costs we consider reasonable because
of this competition. Larger competitors may be able to absorb the burden of any
changes in laws and regulation in the jurisdictions in which we do business and
handle longer periods of reduced prices of gas and oil more easily than we can.
Our competitors may be able to pay more for productive oil and natural gas
properties and may be able to define, evaluate, bid for and purchase a greater
number of properties and prospects than we can. Our ability to acquire
additional properties in the future will depend upon our ability to conduct
efficient operations, evaluate and select suitable properties, implement
advanced technologies and consummate transactions in a highly competitive
environment.

Competitive
conditions may be substantially affected by various forms of energy legislation
and/or regulation considered from time to time by the government of Canada and
other countries as well as factors that we cannot control, including
international political conditions, overall levels of supply and demand for oil
and gas, and the markets for synthetic fuels and alternative energy
sources.

Customers

As we
remain in the exploration stage, we have not yet generated any revenues from
production, nor do we have any customers at this time. We anticipate our
principal target customers to be refiners, remarketers and other
companies.

Royalty
Agreements

Through
the acquisition of Northern, our Company became a party to the following royalty
agreement:

On
December 12, 2003, Nearshore Petroleum Corporation (hereinafter referred to as
“Nearshore”) entered into a Royalty Agreement with Mikwec Energy Canada, Ltd.
(now known as Northern) that potentially encumbers 6 oil sands development
leases covering 23,406 gross acres (9,472 gross hectares) located within our
Sawn Lake properties (hereinafter the “Royalty Agreement”). Nearshore claimed a
6.5% gross overriding royalty from Northern on the leased substances on the land
interests which Northern holds in the above 6 oil sands leases. Nearshore was a
private corporation incorporated in Alberta, Canada, and was owned and
controlled by Mr. Steven P. Gawne and his wife, Mrs. Rebekah J. Gawne, who each
owned 50% of Nearshore. Mr. Steven P. Gawne was formerly the President, Chief
Executive Officer and Director of Deep Well from February 6, 2004 to June 29,
2005. Part or all of this Royalty Agreement has been purportedly transferred by
Nearshore to other parties.

On
February 28, 2005, Deep Well, Northern and Surge agreed that the Company would
be responsible for the portion of the claimed 6.5% royalty payable by Surge, if
any, on lands earned under the February 25, 2005 Farmout Agreement. This
liability could arise by virtue of a royalty agreement between Northern and
Nearshore dated December 12, 2003. This obligation of our Company was further
modified on November 26, 2007, where it was agreed that the Company would not be
liable or obligated to pay any of this claimed portion of the royalty due, if
any, on the portion of the royalty acquired by Andora.

Government Approval and
Crown Royalties

Exploration and
Production. Our operations are subject to Canadian federal and provincial
governmental regulations. Such regulations include: requiring licenses for the
drilling of wells, regulating the location of wells and the method and ability
to produce wells, surface usage and the restoration of land upon which wells
have been drilled, the plugging and abandoning of wells and the transportation
of production from wells. Our operations are also subject to various
conservation regulations, including the regulation of the size of spacing units,
the number of wells which may be drilled in a unit, the unitization or pooling
of oil and gas properties, the rate of production allowable from oil and gas
wells, and the ability to produce oil and gas.

10

The North
American Free Trade Agreement. The North American Free Trade Agreement
(hereinafter referred to as “NAFTA”) grants Canada the freedom to determine
whether exports to the United States or Mexico will be allowed. In making this
determination, Canada must ensure that any export restrictions do not (i) reduce
the proportion of energy exported relative to the supply of the energy resource;
(ii) impose an export price higher than the domestic price; or (iii) disrupt
normal channels of supply. All parties to NAFTA are also prohibited from
imposing minimum export or import price requirements.

Investment Canada
Act. TheInvestment Canada Act
requires notification and/or review by the Government of Canada in certain
cases, including but not limited to, the acquisition of control of a Canadian
Business by a non-Canadian. In certain circumstances, the acquisition of a
working interest in a property which contains recoverable reserves will be
treated as the acquisition of an interest in a “business” and may be subject to
either notification or review, depending on the size of the interest being
acquired and the asset size of the business.

Crown Royalties
and Incentives.
Each province and the federal government of Canada have legislation and
regulations governing land tenure, royalties, production rates and taxes,
environmental protection and other matters under their respective jurisdictions.
The royalty regime is a significant factor in the profitability of oil and
natural gas production. Royalties payable on production from lands other than
Crown lands are determined by negotiations between the parties. Crown royalties
are determined by government regulation and are generally calculated as a
percentage of the value of the gross production with the royalty rate dependent
in part upon prescribed reference prices, well productivity, geographical
location, field discovery date and the type and quality of the petroleum product
produced. From time to time, the governments of Canada and Alberta have
established incentive programs such as royalty rate reductions, royalty
holidays, tax credits, and more recently drilling royalty credits and a new well
incentive program, which provides a maximum five percent royalty rate for all
new wells that begin producing conventional oil and natural gas between April 1,
2009 and March 31, 2011. These incentives are for the purpose of encouraging oil
and natural gas exploration or enhanced recovery projects. These incentives
generally increase cash flow.

Effective
January 1, 2009, oil sands royalties in Alberta are calculated using a sliding
scale for royalty rates ranging from 1% to 9% pre-payout and 25% to 40%
post-payout depending on the world oil price. Project “payout” refers to the
point in which we earn sufficient revenues to recover all of the allowed costs
for the project plus a return allowance. The base royalty starts at 1% and
increases for every dollar the world oil price, as reflected by the West Texas
Intermediate (hereinafter referred to as “WTI”), is priced above $55 per barrel,
to a maximum of 9% when oil is priced at $120 per barrel or greater. The net
royalty starts at 25% and increases for every dollar oil is priced above $55 per
barrel to 40% when oil is priced at $120 or higher.

Research and
Development

We had no
material research and development costs for the fiscal years ended September 30,
2010, 2009 and 2008.

Environmental Laws and
Regulations

The oil
and natural gas industry is subject to environmental laws and regulations
pursuant to Canadian local, provincial and federal legislation. Environmental
legislation provides for restrictions and prohibitions on releases or emissions
of various substances produced or utilized in association with certain oil and
gas industry operations. In addition, legislation requires that well and
facility sites be monitored, abandoned and reclaimed to the satisfaction of
provincial authorities. A breach of such legislation may result in the
imposition of fines and penalties. Under these laws and regulations, we could be
liable for personal injury, clean-up costs and other environmental and property
damages as well as administrative, civil and criminal penalties. Accordingly, we
could be liable or could be required to cease production on properties if
environmental damage occurs. Although we maintain insurance coverage, the costs
of complying with environmental laws and regulations in the future may harm our
business. Furthermore, future changes in environmental laws and regulations
could occur that result in stricter standards and enforcement, larger fines and
liability, and increased capital expenditures and operating costs, any of which
could have a material adverse effect on our financial condition or results of
operations. We maintain commercial property and general liability insurance
coverage on the properties we operate. We also maintain operators extra expense
insurance which provides coverage for well control incidents specifically
relating to regaining control of a well, seepage, pollution, clean-up and
containment. No coverage is maintained with respect to any fine or penalty
required to be paid due to a violation of the regulations set out by the federal
and provincial regulatory authorities. We are committed to meeting our
responsibilities to protect the environment and anticipate making increased
expenditures of both a capital and expense nature as a result of the
increasingly stringent laws relating to the protection of the
environment.

Alberta’s
new climate change regulation, effective July 1, 2007, requires Alberta
facilities that emit more than 100,000 tonnes of greenhouse gases a year to
reduce emissions intensity by 12 per cent. Companies have four choices to meet
their reductions: 1.) they can make operating improvements to their operations
that will result in greenhouse gas emission reductions; 2.) purchase Alberta
based offset credits; 3.) contribute to the Climate Change and Emissions
Management Fund; and 4.) purchase or use emission performance credits, also
called EPCs, these credits are generated by facilities that have gone beyond the
12% mandatory intensity reduction. EPCs can be banked for future use or sold to
other facilities that need to meet the reduction target.

11

On June
18, 2009, the Canadian government passed the new Environmental Enforcement Act
(“EEA”). The EEA was created to strengthen and amend nine existing Statutes that
relate to the environment and to enact provisions respecting the enforcement of
certain Statutes that relate to the environment. The EEA amends various
enforcement, offence, penalty and sentencing provisions to deter offenders from
committing offences under the EEA by setting minimum and maximum fines for
serious offences. The EEA also gives enforcement officers new powers to
investigate cases and grants courts new sentencing authorities that ensure
penalties reflect the seriousness of the pollution and wildlife offences. The
EEA also expands the authority to deal with environmental offenders by: 1.)
specifying aggravating factors such as causing damage to wildlife or wildlife
habitat, or causing damage that is extensive, persistent or irreparable; 2.)
providing fine ranges that are higher for corporate offenders than for
individuals; 3.) doubling fine ranges for repeat offenders; 4.) authorizing the
suspension and cancellation of licenses, permits or other authorizations upon
conviction; 5.) requiring corporate offenders to report convictions to
shareholders; and 6.) mandating the reporting of corporate offences on a public
registry.

Employees

Our
Company currently has two prime subcontractors and three full-time employees.
For further information on our subcontractors see “Compensation Arrangements for
Executive Officers” under Item 11 “Executive Compensation”. We expect to hire
from time to time more employees, independent consultants, and contractors
during the stages of implementing our plans.

ITEM
1A.

RISK
FACTORS

An
investment in our common stock is speculative and involves a high degree of risk
and uncertainty. You should carefully consider the risks described below,
together with the other information contained in our reports filed with the SEC,
including the consolidated financial statements and notes thereto of our Company
before deciding to invest in our common stock. The risks described below are not
the only ones facing our Company. Additional risks not presently known to us, or
that we presently consider immaterial may also adversely affect our Company. If
any of the following risks occur, our business, financial condition and results
of operations and the value of our common stock could be materially and
adversely affected.

Any
Development of Our Resources Will Be Subject To Crown Royalties. The royalty regime of Alberta is a
significant factor in the profitability of oil and natural gas production in
Alberta, Canada. Crown royalties are determined by government regulation and are
generally calculated as a percentage of the value of the gross production with
the royalty rate dependent in part upon prescribed reference prices, well
productivity, geographical location, field discovery date and the type and
quality of the petroleum product produced. From time to time, the governments of
Canada and Alberta have established incentive programs such as royalty rate
reductions, royalty holidays, tax credits, and more recently drilling royalty
credits and a new well incentive program, which provides a maximum five percent
royalty rate for all new wells that begin producing conventional oil and natural
gas between April 1, 2009 and March 31, 2011. These incentives are for the
purpose of encouraging oil and natural gas exploration or enhanced recovery
projects. These incentives generally increase cash flow. Penalties and
interest may be charged to
us if we fail to remit royalties on our production to the Crown as prescribed in
the regulation.

We Are An
Exploration Stage Company Implementing A New Business Plan. We are an
exploration stage Company with only a limited operating history upon which to
base an evaluation of our current business and future prospects, and we have
just begun to implement our business plan. Since our inception, we have suffered
recurring losses from operations and have been dependent on new investment to
sustain our operations. During the years ended September 30, 2010, 2009 and 2008
we reported net losses of $1,331,552, $2,167,343 and $2,796,055
respectively.

The Successful
Implementation Of Our Business Plan Is Subject To Risks Inherent In The Heavy
Oil Business. Our heavy oil operations are subject to the economic risks
typically associated with exploration, development and production activities,
including the necessity of significant expenditures to locate and acquire
properties and to drill exploratory wells. In addition, the cost and timing of
drilling, completing and operating wells is often uncertain. In conducting
exploration and development activities, the presence of unanticipated pressure
or irregularities in formations, miscalculations or accidents may cause our
exploration, development and production activities to be unsuccessful. This
could result in a total loss of our investment in a particular property. If
exploration efforts are unsuccessful in establishing proven reserves and
exploration activities cease, the amounts accumulated as unproven costs will be
charged against earnings as impairments. Our exploitation and development of oil
and gas reserves depends upon access to the areas where our operations are to be
conducted. We conduct a portion of our operations in regions where we are only
able to do so on a seasonal basis. Unless the surface is sufficiently frozen, we
are unable to access our properties, drill or otherwise conduct our operations
as planned. In addition, if the surface thaws earlier than expected, we must
cease our operations for the season earlier than planned. Our operations are
affected by road bans imposed from time to time during the break-up and thaw
period in the Spring. Road bans are also imposed due to spring-break up, heavy
rain, mud, rock slides and periods of high water, which can restrict access to
our well sites and potential production facility sites. Our inability to access
our properties or to conduct our operations as planned will result in a shutdown
or slow down of our operations, which will adversely affect our
business.

12

We Rely On
Independent Experts And Technical Or Operational Service Providers Over Whom We
May Have Limited Control. The success of our business is dependent upon
the efforts of various third parties that we do not control. We rely upon
various companies to assist us in identifying desirable oil prospects to acquire
and to provide us with technical assistance and services. We also rely upon the
services of geologists, geophysicists, chemists, engineers and other scientists
to explore and analyze oil prospects to determine a method in which the oil
prospects may be developed in a cost-effective manner. In addition, we rely upon
the owners and operators of oil drilling equipment to drill and develop our
prospects to production. Although we have developed relationships with a number
of third-party service providers, we cannot assure that we will be able to
continue to rely on such persons. If any of these relationships with third-party
service providers are terminated or are unavailable on commercially acceptable
terms, we may not be able to execute our business plan. Our limited control over
the activities and business practices of these third parties, any inability on
our part to maintain satisfactory commercial relationships with them or their
failure to provide quality services could materially and adversely affect our
business, results of operations and financial condition.

Our Interests Are
Held In The Form Of Leases That We May Be Unable To Retain. Our Swan Lake
property is held under leases and working interests in leases. These leases we
are a party to are for a fixed term of 15 years, but contain a provision that
allows us to extend the term of the lease so long as we meet the minimum level
of evaluation as set out by the Government of Alberta tenure guidelines. If we
or the holder of a lease fails to meet the specific requirements of the lease
regarding delay or non-payment of rental payments or we or the holder of the
lease fail to meet the minimum level of evaluation some or all of our leases may
terminate or expire. There can be no assurance that any of the obligations
required to maintain each lease will be met. The termination or expiration of
our leases or the working interests relating to leases may reduce our
opportunity to exploit a given prospect for oil production and thus have a
material adverse effect on our business, results of operations and financial
condition.

We Expect Our
Operating Expenses To Increase Substantially In The Future And We May Need To
Raise Additional Funds. We have a history of net
losses and expect that our operating expenses will increase substantially over
the next 12 months as we continue to implement our business plan. In addition,
we may experience a material decrease in liquidity due to unforeseen capital
calls or other events and uncertainties. As a result, we may need to raise
additional funds, and such funds may not be available on favourable terms, if at
all. If we cannot raise funds on acceptable terms, we may not be able to execute
our business plan, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements. This may seriously harm our
business, results of operations and financial condition..

Our Ability To
Produce Sufficient Quantities Of Oil From Our Properties May Be Adversely
Affected By A Number Of Factors Outside Of Our Control. The business of
exploring for and producing oil and gas involves a substantial risk of
investment loss. Drilling oil wells involves the risk that the wells may be
unproductive or that, although productive, the wells may not produce oil in
economic quantities. Other hazards such as unusual or unexpected geological
formations, pressures, fires, blowouts, loss of circulation of drilling fluids
or other conditions may substantially delay or prevent completion of any well.
Adverse weather conditions can also hinder drilling operations. A productive
well may become uneconomic due to pressure depletion, water encroachment,
mechanical difficulties, etc., which impair or prevent the production of oil
and/or gas from the well. There can be no assurance that oil will be produced
from the properties in which we have interests. Marketability of any oil that we
acquire or discover may be influenced by numerous factors beyond our control.
The marketability of our production will depend on the proximity of our reserves
to and the capacity of, third party facilities and services, including oil and
natural gas gathering systems, pipelines, trucking or terminal facilities, and
processing facilities. The unavailability or insufficient capacity of these
facilities and services could force us to shut-in producing wells, delay the
commencement of production, or discontinue development plans for some of our
properties, which would adversely affect our financial condition and
performance. There may be periods of time when pipeline capacity is inadequate
to meet our oil transportation needs. During periods when pipeline capacity is
inadequate, we may be forced to reduce production or incur additional expense as
existing production is compressed to fit into existing pipelines. Other risk
factors include availability of drilling and related equipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and
environmental protection. We cannot predict how these factors may affect our
business.

We Do Not Control
All Of Our Operations. We do not operate all of our properties and we
therefore have limited influence over the testing, drilling and production
operations of those properties. Andora currently operates 12 of our 68 oil
sections in which we have a working interest. Currently, our Company has an 80%
working interest in 56 contiguous sections of oil sands development leases, and
a 40% working interest in an additional 12 contiguous sections of oil sands
development leases in the Peace River oil sands area of Alberta, Canada. Our oil
sands leases cover 43,015 gross acres (17,408 gross hectares). Our lack of
control of the 12 sections Andora currently operates could result in the
following:

·

Andora
might initiate exploration or development on a faster or slower pace than
we prefer;

·

Andora
might propose to drill more wells or build more facilities on a project
than we have funds for or that we deem appropriate, which could mean that
we are unable to participate in the project or share in the revenues
generated by the project;

·

If
Andora refuses to initiate a project on these 12 sections, we might be
unable to pursue the project.

13

Any of
these events could materially reduce the value of those properties
affected.

We Are Party To
Some Lawsuits And Will Be Adversely Affected If We Are Found To Be Liable In
Connection With Any Legal Proceedings.We are party to some
lawsuits described in this Form 10-K under the heading “Legal Proceedings”. We
intend to vigorously defend ourselves against the claims made in the lawsuits,
but we cannot predict the outcome of these proceedings, the commencement or
outcome of any future proceedings against us, or whether any such proceeding
would lead to monetary damages that would have a material adverse effect on our
financial position.

Aboriginal
Peoples May Make Claims Regarding The Lands On Which Our Operations Are
Conducted. Aboriginal peoples have claimed aboriginal title and rights to
a substantial portion of western Canada. Since aboriginal peoples have filed a
claim claiming aboriginal title or rights to the lands on which some of our
properties are located, and if such a claim is successful, it could have a
material adverse effect on our operations.

The ERCB
governs our operations in Alberta, Canada and they have implemented a new
directive (Directive 056) that the Alberta Government issued its First Nations
Consultation Policy on Land Management and Resource Development on May 16, 2005.
The ERCB expects that all industry applicants must adhere to this policy and the
consultation guidelines. These requirements and expectations apply to the
licensing of all new energy developments and all modifications to existing
energy developments, as covered in Directive 056. In the policy, the Alberta
Government has developed consultation guidelines to address specific questions
about how consultation for land management and resource development should occur
in relation to specific activities. Prior to filing an application, the
applicant must address all questions, objections, and concerns regarding the
proposed development project and attempt to resolve them. This includes concerns
and objections raised by members of the public, industry, government
representatives, First Nations, Métis, and other interested parties. This
process can cause significant delays in obtaining a drilling permit for
exploration and/or a production well license for both oil and gas.

Our Operations
Are Subject To A Wide Range of Environmental Legislation and Regulation From All
Levels Of Government Of Which We Have No Control. Environmental
legislation imposes, among other things, restrictions, liabilities and
obligations in connection with the generation, handling, storage,
transportation, treatment and disposal of hazardous substances and waste and in
connection with spills, releases and emissions of various substances to the
environment. As well, environmental regulations are imposed on the qualities and
compositions of the products sold and imported. Environmental legislation also
requires that wells, facility sites and other properties associated with our
operations be operated, maintained, abandoned and reclaimed to the satisfaction
of applicable regulatory authorities. In addition, certain types of operations,
including exploration and development projects and significant changes to
certain existing projects, may require the submission and approval of
environmental impact assessments. Compliance with environmental legislation can
require significant expenditures, and failure to comply with environmental
legislation may result in the imposition of fines and penalties and liability
for clean up costs and damages. We cannot assure that the costs of complying
with environmental legislation in the future will not have a material adverse
effect on our financial condition or results of operations. We anticipate that
changes in environmental legislation may require, among other things, reductions
in emissions to the air from its operations and result in increased capital
expenditures. Future changes in environmental legislation could occur and result
in stricter standards and enforcement, larger fines and liability, and increased
capital expenditures and operating costs, which could have a material adverse
effect on our results of operations and financial condition..

Market
Fluctuations In The Prices Of Oil Could Adversely Affect Our Business.
Prices for oil tend to fluctuate significantly in response to factors beyond our
control. These factors include, but are not limited to, the continued threat of
war in the Middle East and actions of the Organization of Petroleum Exporting
Countries and its maintenance of production constraints, the U.S. economic
environment, weather conditions, the availability of alternate fuel sources,
transportation interruption, the impact of drilling levels on crude oil and
natural gas supply, and the environmental and access issues that could limit
future drilling activities for the industry.

Changes
in commodity prices may significantly affect our capital resources, liquidity
and expected operating results. Price changes directly affect revenues and can
indirectly impact expected production by changing the amount of funds available
to reinvest in exploration and development activities. Reductions in oil and gas
prices not only reduce revenues and profits, but could also reduce the
quantities of reserves that are commercially recoverable. Significant declines
in prices could result in non-cash charges to earnings due to
impairment.

Changes
in commodity prices may also significantly affect our ability to estimate the
value of producing properties for acquisition and divestiture and often cause
disruption in the market for oil producing properties, as buyers and sellers
have difficulty agreeing on the value of the properties. Price volatility also
makes it difficult to budget for and project the return on acquisitions and
development and exploitation of projects. We expect that commodity prices will
continue to fluctuate significantly in the future.

14

Our Stock Price
Could Decline. Our common stock is traded on the OTCQB marketplace. There
can be no assurance that an active public market will continue for the common
stock or that the market price for the common stock will not decline below its
current price. Such price may be influenced by many factors, including but not
limited to, investor perception of us and our industry and general economic and
market conditions. The trading price of the common stock could be subject to
wide fluctuations in response to announcements of our business developments or
our competitors, quarterly variations in operating results, and other events or
factors. In addition, stock markets have experienced extreme price volatility in
recent years. This volatility has had a substantial effect on the market prices
of companies, at times for reasons unrelated to their operating performance.
Such broad market fluctuations may adversely affect the price of our common
stock. Our stock price may decline as a result of future sales of our shares or
the perception that such sales may occur.

We Could Be
Subject to SEC Penalties If We Do Not File All Of Our SEC Reports.
Although we are presently up to date in our filings, in the past we have not
filed all of our annual and quarterly reports required to be filed by us with
the SEC, in a timely manner. It is possible that the SEC could take enforcement
action against us, including potentially the de-registration of our securities,
if we fail to file our annual and quarterly reports in a timely manner as
required by the SEC. If the SEC were to take any such actions, it could
adversely affect the liquidity of trading in our common stock and the amount of
information about our Company that is publicly available.

Broker-Dealers
Are Not Permitted To Solicit Trades In Our Common Stock. Our common stock
is considered to be a “penny stock” because it meets one or more of the
definitions of “penny stock” in the Exchange Act Rule 3a51-1. The principal
result or effect of being designated a “penny stock” is that securities
broker-dealers cannot recommend the stock and may only trade in it on an
unsolicited basis.

Risks Related to
Broker-Dealer Requirements Involving Penny Stocks / Risks Affecting Trading and
Liquidity. Section 15(g) of the Securities Exchange Act of 1934, as
amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers
dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor’s account. These rules may have the effect of reducing
the level of trading activity in the secondary market, if and when one
develops.

Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, SEC Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment experience
and investment objectives. Pursuant to the Penny Stock Reform Act of 1990,
broker-dealers are further obligated to provide customers with monthly account
statements. Compliance with the foregoing requirements may make it more
difficult for investors in our stock to resell their shares to third parties or
to alternatively dispose of them in the market or otherwise.

ITEM
1B.

UNRESOLVED
STAFF COMMENTS

None.

ITEM
2.

PROPERTIES

Office
Leases

We lease
and maintain office space in Edmonton, Alberta for corporate and administrative
operations; the lease expires on December 31, 2013. We also lease and maintain
office space in Calgary, Alberta; this lease expires on November 30,
2012.

Oil and Gas
Properties

Acreage

Currently
we own an 80% working interest in 56 contiguous sections of oil sands
development leases and a 40% working interest in 12 sections of oil sands leases
in the Peace River oil sands area in North Central Alberta. The oil sands leases
cover 43,015 gross acres (17,408 gross hectares). Of the 68 contiguous sections
of oil sands leases, Andora is the operator of 12 sections in which we have a
40% working interest, and we are the operator on 56 sections where we have an
80% working interest.

15

In
conjunction with our 2008/2009 winter drilling program, and effective December
1, 2008, we acquired 12 km of existing road infrastructure from Paramount
Resources Ltd. (hereinafter referred to as “Paramount”) through a transfer of
title. Along with this transfer of title we acquired 2 vertical
wells, 1 of which is located on our Sawn Lake oil sands lease and the other
located approximately 2.5 miles north of our Sawn Lake oil sands
lease.

Effective
February 1, 2009, we also acquired from Penn West Petroleum Ltd. an LOC that
totalled 8.7 km of an existing road on our Sawn Lake property.

On April
30, 2009, the Alberta Department of Energy approved our application to convert 5
sections of our oil sands permit to a 15-year primary lease. By drilling on
these lands where the permits were set to expire, we have preserved title to 5
sections and now have a primary lease, which is valid for an additional 15
years.

The
following table summarizes our gross and net developed and undeveloped oil and
natural gas rights under lease as of September 30, 2010.

OIL SANDS RIGHTS as of September 30, 2010

Gross

Hectares

Net

Hectares

Gross

Acres

Net

Acres

Oil
Sands Developed Acreage

Sawn
Lake – Peace River oil sands area, Alberta, Canada

None

None

None

None

Total

None

None

None

None

Oil
Sands Undeveloped Acreage

Sawn
Lake – Peace River oil sands area, Alberta, Canada

56
sections (1)

14,336

11,469

35,425

28,340

12
sections (2)

3,072

1,229

7,591

3,036

Total

17,408

12,698

43,015

31,376

TOTAL
HECTARES/ACRES

17,408

12,698

43,015

31,376

(1)
80% working interest.

(2)
40% working interest.

A
developed acre is considered to mean those acres spaced or assignable to
productive wells; a gross acre is an acre in which a working interest is owned,
and a net acre is the result that is obtained when fractional ownership working
interest is multiplied by gross acres. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole numbers and
fractions thereof.

Undeveloped
acreage is considered to be those lease acres on which wells have not been
drilled or completed to a point that would permit the production of commercial
quantities of oil or natural gas, regardless of whether or not that acreage
contains proven reserves, but does not include undrilled acreage held by
production under the terms of a lease. As is customary in the oil and gas
industry, we can generally retain our interest in undeveloped acreage by
drilling activity that establishes commercial production sufficient to maintain
the leases, or by paying delay rentals during the remaining primary term of such
a lease. The oil and natural gas leases in which we have an interest are for
varying primary terms, and if production continues from our developed lease
acreage beyond the primary term, we are entitled to hold the lease for as long
as oil or natural gas is produced.

Reserves,
Production and Delivery Commitments

We did
not engage in any sustained production activities during the years ending
September 30, 2010, 2009 and 2008 nor did we have any proven or probable
reserves at the end of such periods and thus were not required to provide any of
the production data required by Statement of Financial Accounting Standards No.
69. We do not have any obligations under existing delivery commitment contracts
or agreements calling for the provision of fixed and determinable quantities of
oil and gas over the next three years, and have therefore not filed any
information or reports with any federal authority or agency containing estimates
of total, proven developed or undeveloped net oil or gas
reserves.

16

Drilling
Activity

The
following tables summarize the results of our drilling activities in the Sawn
Lake area of Alberta during the years ended September 30, 2010, 2009 and
2008.

Exploratory
Wells

2010

2009

2008

year ended September 30

Gross

Net

Gross

Net

Gross

Net

Gas

–

–

–

–

–

–

Oil

–

–

–

–

–

–

Oil/Gas

–

–

–

–

–

–

Evaluating

–

–

–

–

–

–

Drilling
at end of year

–

–

–

–

–

–

Suspended

–

–

–

–

–

–

Abandoned

–

–

–

–

–

–

Total
Exploratory Wells

–

–

–

–

–

–

Development
Wells

2010

2009

2008

year ended September 30

Gross

Net

Gross

Net

Gross

Net

Gas

–

–

–

–

–

–

Oil

–

–

–

–

–

Oil/Gas

–

–

–

–

–

–

Evaluating

–

–

–

–

Drilling
at end of year

–

–

–

–

–

–

Suspended

–

–

7

4.8

**

–

–

Abandoned

–

–

1

0.8

**

–

–

Total
Development Wells

–

–

8

5.6

–

–

*40% working
interest

**80% working
interest

Present
Activities

In
September 2009, we submitted an application to the ERCB for a commercial bitumen
recovery scheme to evaluate the 12-14-092-13W5 well for potential development
using CSS and later we added the 6-22-092-13W5 well to the
application.

On
October 14, 2010, our CSS Application was approved by the ERCB to conduct one
CSS production test on one of the wells to evaluate the oil sands resource using
this secondary recovery technology. The Company has appointed Asher Engineering
Ltd. to manage the CSS project and construction, including procurement of all
required equipment.The
CSS process involves steam injection into a well for a period of up to 30 days,
potentially a ”soaking” period, followed by production of heavy oil for up to 50
days or more. This CSS production test is not only for the production of heavy
oil from the Blue Sky zone of the Sawn Lake project but it will also aid in
quantifying proven reserves of oil.

Past
Activities

A total
of three horizontal wells were successfully drilled and cased by Signet (now
known as Andora Energy Corporation), our former farmout partner, on the Sawn
Lake Property during 2005 and 2006, and a fourth location was prepared for
drilling. These wells are pending further evaluation and the development of an
exploitation plan with our joint interest Andora Energy
Corporation.

We
successfully completed our 2008/2009 winter drilling program and met our
objectives by drilling 6 wells, 3 of which were drilled on our oil sands permit
in order to provide technical data to support the required Department of Energy
regulation to convert our 5-year oil sands permit into a 15-year primary lease.
In addition, three wells were drilled further to the North of the
above-mentioned 3 wells. These three northern wells, drilled by us, continued
the delineation of the main reservoir trend and confirmed that the main
reservoir continues north. We are evaluating the many options for production now
available to us to decide the best course of action. Drilling on these 80% owned
lands has opened new avenues for testing and further development of the Sawn
Lake project. The focus of our Company’s operations is to define the heavy oil
reservoir to establish reserves and to determine the best technology under which
oil can be produced from the Sawn Lake project in order to initiate production
and generate a cash flow.

17

On
December 1, 2008, we acquired from Paramount 2 wells they previously drilled. Of
the 2 wells, one was drilled to a vertical depth of 737 meters on our existing
oil sands lease and was cased for bluesky heavy oil production. The casing of
this well was perforated at intervals from 681.5m to 684.5m and 684.5m to
685.0m. This well’s status is drilled and cased for future bitumen
production.

On
December 4, 2008, as operator, we successfully spudded the first well of six
wells to be drilled in our 2008/2009 winter drilling program. This well is
located at 12-14-092-13W5 in North Central Alberta and was drilled to a vertical
depth of 680 meters. The well was logged, cased, and completed for bluesky heavy
oil production, with perforated intervals from 644.5m to 649.5m. We submitted an
application with the Energy Resources Conservation Board for a commercial
bitumen recovery scheme to evaluate the 12-14-092-13W5 well for potential
development using Cyclic Steam Stimulation. This well is suspended pending the
results of testing.

On
December 15, 2008, as operator, we successfully spudded the second well of our
six well 2008/2009 winter drilling program. This well is located at
9-16-092-13W5 in North Central Alberta and was drilled to a vertical depth of
680 meters. The well was logged, cased, and completed for bluesky heavy oil
production, with perforated intervals from 638.5m to 643.5m. This well is
suspended pending the results of testing.

On
January 8, 2009, as operator, we successfully spudded the third well of our six
well 2008/2009 winter drilling program. This well is located at 10-33-091-13W5
in North Central Alberta and was drilled to a vertical depth of 708 meters. This
well determined the south western edge of the Bluesky reservoir of our Sawn Lake
Project.

On
January 16, 2009, as operator, we successfully spudded the fourth well of our
six well 2008/2009 winter drilling program. This well is located at 7-5-092-13W5
in North Central Alberta and was drilled to a vertical depth of 718 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation and the development of an exploitation.

On
January 25, 2009, as operator, we successfully spudded the fifth well of our six
well 2008/2009 winter drilling program. This well is located at 8-4-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 725 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation and the development of an exploitation plan.

On
February 2, 2009, as operator, we successfully spudded the sixth well of our six
well 2008/2009 winter drilling program. This well is located at 6-22-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 660 meters. The
well was logged and cased for bluesky heavy oil production. We also added the
6-22-092-13W5 well to the CSS Application.

ITEM
3.

LEGAL
PROCEEDINGS

I.G.M. Resources Corp. vs.
Deep Well Oil & Gas, Inc., et al

On March
10, 2005, I.G.M. Resources Corp. (hereinafter referred to as “IGM”) filed
against Classic Energy Inc., 979708 Alberta Ltd. (hereinafter referred to as
“979708”), Deep Well Oil & Gas, Inc., Nearshore Petroleum Corporation,
Steven P. Gawne, Rebekah Gawne, Gawne Family Trust, 1089144 Alberta Ltd., John
F. Brown, Diane Lynn McClaflin, Cassandra Doreen Brown, Elissa Alexandra Brown,
Brown Family Trust, Priority Exploration Ltd., Northern Alberta Oil Ltd. and
Gordon Skulmoski (the “Defendants”) a Statement of Claim in the Court of Queen’s
Bench of Alberta Judicial District of Calgary. This suit is part of a series of
lawsuits or actions undertaken by IGM against some of the other above-named
Defendants.

IGM was a
minority shareholder of 979708. 979708 was purportedly in the business of
discovering, assembling and acquiring oil & gas prospects. In 2002 and 2003,
979708 acquired oil and gas prospects in the Sawn Lake area of Alberta. On or
about the 14th of July
2003, all or substantially all the assets of 979708 were sold to Classic Energy
Inc. IGM claims the value of the assets sold was far in excess of the value paid
for those assets. On April 23, 2004, Northern purchased some of Classic Energy
Inc.’s assets, some of which are under dispute by IGM. On June 7, 2005, Deep
Well acquired all of the common shares of Northern thereby giving Deep Well an
indirect beneficial interest in the assets IGM is claiming an interest
in.

IGM seeks
an order setting aside the transaction and returning the assets to 979708,
compensation in the amount of $15,000,000 Cdn, and a declaration of trust
declaring that Northern and Deep Well hold all of the assets acquired from
979708 and any property acquired by use of such assets or confidential
information of 979708, in trust for IGM.

This
lawsuit has been stayed pending the outcome of the other litigation by IGM
against some of the above defendants other than Deep Well and Northern. The
Company believes the claims are without merit and will vigorously defend against
them. As of September 30, 2010, no contingent liability has been recorded, as a
successful outcome for the Plaintiff is unlikely.

18

Hardie & Kelly vs.
Brown, et al

On June
2, 2006, Hardie and Kelly (the “Plaintiff”), Trustee of the Estate of John
Forbes Brown, filed against John Forbes Brown, a bankrupt, Diane Lynn McClaflin,
1089144 Alberta Ltd., and Deep Well (the “Defendants”) an Amended Statement of
Claim filed in the Court of Queen’s Bench of Alberta Judicial District of
Calgary. John Forbes Brown was a former officer and then sub-contractor of Deep
Well before and at the time he was assigned into bankruptcy on July 12, 2004.
The Plaintiff claims, in addition to other issues unrelated to Deep Well, that
John Forbes Brown received 4,812,500 Deep Well shares as a result of his
employment in Deep Well and that John Forbes Brown improperly assigned these
shares to the numbered company as a ruse entered into on the eve of insolvency
by John Forbes Brown in order to facilitate the hiding of assets from his
creditors and the trustee of his bankruptcy. The Plaintiff further claims that
on August 23, 2004, John Forbes Brown advised the Plaintiff that he in fact
owned the above shares and did not disclose this ownership in his filed
bankruptcy statement of affairs.

The
Plaintiff further claims that John Forbes Brown would lodge the said shares with
his lawyer until such time as these shares could be transferred to the
Plaintiff. The Plaintiff further claims that unbeknownst to them John Forbes
Brown surreptitiously removed the shares from his lawyer’s office and delivered
them to Deep Well so that Deep Well could cancel them. The Plaintiff claims that
Deep Well conspired with John Forbes Brown to defraud the creditors of John
Forbes Brown by taking receipt and canceling the said shares. The Plaintiff
claims that consideration paid by Deep Well for the said shares was invested in
the home owned by John Forbes Brown and his wife. The Plaintiff seeks: 1.) An
accounting of the proceeds and benefits derived by the dealings of the shares;
2.) The home owned by John Forbes Brown and his wife, to be held in trust on
behalf of the Plaintiff, and an accounting of proceeds related to this trust;
3.) Damages from the Defendants because of their actions; 4.) A judgment for
$15,612,645 Cdn; 5.) An order to sell John Forbes Brown’s home; and 6.) Interest
and costs.

We plan
to vigorously defend ourselves against the Plaintiff’s claims. As at September
30, 2010, no contingent liability has been recorded, as a successful outcome for
the Plaintiff is unlikely.

Northern Alberta Oil Ltd.
vs. 1132559 Alberta Ltd.

On June
27, 2008, our subsidiary, Northern Alberta Oil Ltd. (hereinafter referred to as
“Northern”), filed a Statement of Claim in the Court of Queen’s Bench of Alberta
Judicial District of Edmonton against 1132559 Alberta Ltd. (hereinafter referred
to as “113”). Northern claims that 113 has not paid their share of the incurred
operating costs for the Sawn Lake project. Northern further claims that they
paid the operating expenses required on behalf of 113 and invoiced 113 for the
amounts and that 113 refused or neglected to reimburse their proportionate share
of the operating costs. Northern seeks: 1.) Payment in full in the amount of
$74,470.71 in Canadian funds for the amounts invoiced to 113; 2.) Interest
pursuant to section 106 of the PASC (“Petroleum Accountants Society of Canada”)
1996 Accounting Procedure; and 3.) Costs of the action.

On August
30, 2010, our subsidiary, Northern, filed an additional Statement of Claim in
the Court of Queen’s Bench of Alberta Judicial District of Edmonton against 113.
Northern claims that 113 has neglected and refused to pay the cash calls
pursuant to two AFEs (“Authority for Expenditure”) that were approved and signed
by 113. Northern seeks: 1.) Payment in full in the amount of $70,584.50 in
Canadian funds being the balance owing, exclusive of interest, for 113’s
proportionate share of the cash calls. 2.) Interest pursuant to section
505(b)(i) of the 1990 CAPL Operating Agreement; and 3.) Costs of the
action.

ITEM
4.

(REMOVED
AND RESERVED)

19

PART
II

ITEM
5.

MARKET
FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

Market Price Information for
Common Stock

Deep
Well’s stock is currently quoted on the OTCQB marketplace under the trading
symbol DWOG. The following table sets forth the high and low sales prices for
Deep Well common stock as reported on the OTCQB marketplace for the periods
indicated below since April 4, 2010, all other prior sales prices are quoted on
the pink sheets. These quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions:

High

Low

Fiscal
September 30, 2006

First
Quarter

$

1.31

$

0.37

Second
Quarter

$

2.98

$

1.15

Third
Quarter

$

2.85

$

1.45

Fourth
Quarter

$

1.76

$

0.57

Fiscal
September 30, 2007

First
Quarter

$

0.66

$

0.33

Second
Quarter

$

0.56

$

0.23

Third
Quarter

$

1.05

$

0.35

Fourth
Quarter

$

0.84

$

0.45

Fiscal
September 30, 2008

First
Quarter

$

0.58

$

0.45

Second
Quarter

$

0.63

$

0.31

Third
Quarter

$

0.73

$

0.42

Fourth
Quarter

$

0.58

$

0.20

Fiscal
September 30, 2009

First
Quarter

$

0.39

$

0.13

Second
Quarter

$

0.29

$

0.14

Third
Quarter

$

0.19

$

0.14

Fourth
Quarter

$

0.20

$

0.13

Fiscal
September 30, 2010

First
Quarter

$

0.18

$

0.11

Second
Quarter

$

0.17

$

0.08

Third
Quarter

$

0.12

$

0.03

Fourth
Quarter

$

0.07

$

0.03

Holders of
Record

As of
November 26, 2010, we had approximately 172 holders of record of our shares of
common stock. Our Company estimates that investment dealers and other nominees
are the record holders for approximately 2,553 beneficial holders.

Dividends

We have
not paid cash dividends since inception. We intend to retain all of our
earnings, if any, for use in our business and do not anticipate paying any cash
dividends in the foreseeable future. The payment of any future dividends will be
at the discretion of the Board of Directors and will depend upon a number of
factors, including future earnings, the success of our business activities,
capital requirements, the general financial condition and our future prospects,
general business conditions and such other factors as the Board of Directors may
deem relevant.

Securities Authorized for
Issuance Under Equity Compensation Plan

The
following table provides information as of September 30, 2010 with respect to
shares of Deep Well’s common stock that may be issued under our existing equity
compensation plans.

20

Equity Compensation Plan Category

(a)

Number of Securities

to be issued upon

exercise of

outstanding options,

warrants and rights

(b)

Weighted-average

exercise price of

outstanding

options, warrants

and rights

(c)

Number of Securities

remaining available for

future issuance under

equity compensation

plans (excluding securities

reflected in column (a))

Equity
compensation plans approved by security holders

3,378,500

$

0.69

7,298,926

*

Equity
compensation plans not approved by security holders

None

None

None

Total

3,378,500

$

0.69

7,298,926

*

* Based
on 106,774,258 issued and
outstanding shares as at September 30, 2010. The maximum number of common shares
that may be reserved for issuance under the Stock Option Plan may not exceed 10%
of our Company’s issued and outstanding common shares.

Stock
Option Plan

On
November 28, 2005, our Board of Directors adopted the Deep Well Oil & Gas,
Inc. stock option plan (the “Stock Option Plan”). The Stock Option Plan, which
is administered by the Board, permits options to acquire shares of Deep Well’s
common stock to be granted to our directors, senior officers and employees, as
well as certain consultants and other persons providing services to our Company.
This Stock Option Plan was adopted to provide an incentive to the retention of
our directors, officers and employees as well as consultants that we may wish to
retain in the future. The maximum number of common shares that may be reserved
for issuance under the Stock Option Plan may not exceed 10% of our issued and
outstanding common shares, subject to adjustment as contemplated by the Stock
Option Plan. On November 28, 2005, the Board granted 375,000 options to acquire
common shares vested over three years to each director of Deep Well and granted
187,500 options to acquire common shares to a director of a subsidiary of Deep
Well. The exercise price of such options is $0.71 per share. In each case, the
vesting of such director options will occur only if the holder of the options
continues to provide services to us during the immediate annual period preceding
the relevant vesting date. The options will terminate at the close of business
five years from the date of grant. In addition, on November 28, 2005, the Board
granted 390,000 options to acquire common shares vested over three years to
certain corporations providing consulting services to us. Each of such
consultant firms is wholly owned by directors of our Company. The exercise price
of such options is $0.71 per share. In each case, the vesting of such consultant
options will occur only if the holder of the options continues to provide
services to us on the relevant vesting date. These options were set to terminate
at the close of business five years from the date of grant, and are therefore
expired. The Plan was approved by a majority of shareholders at the February 24,
2010 general meeting of stockholders. The Stock Option Plan is administered by
the Board and permits options to acquire shares of the Deep Well’s common shares
to be granted to directors, senior officers and employees of the Company and its
subsidiaries, as well as certain consultants and other persons providing
services to the Company or its subsidiaries.

On
September 28, 2007, our Board of Directors granted options under the stock
option plan to a certain employee to acquire 36,000 common shares of our Company
at the exercise price of $0.47 per common share, of which 8,000 shall be vested
immediately and 28,000 shall be vested at a rate of 2,000 common shares per
month commencing September 30, 2007, so long as the employee continues to
provide employment services on such vesting dates.

On
October 1, 2007, we entered into a Consulting Agreement, effective September 20,
2007, with R.N. Dell Energy Ltd. (hereinafter referred to as “Contractor”). On
September 28, 2007, under the terms of the Consulting Agreement, our Board of
Directors granted options to the Contractor to acquire 240,000 common shares of
our Company at the exercise price of $0.47 per common share (being the closing
price as of the day before the effective date) which shall be vested at a rate
of 20,000 common shares per month commencing October 31, 2007, so long as the
Contractor continues to provide consulting services on such vesting
dates.

Performance
Graph

We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
therefore are not required to provide the information required under this
item.

21

Recent Sales of Unregistered
Securities

On August
14, 2008, pursuant to a subscription agreement, our Company completed a private
placement to one investor, the first tranche being 10,638,297 units at a price
of $0.47 per unit, for total gross proceeds of $5,000,000. Each unit is
comprised of one common share, one common share purchase warrant (“Whole
Warrant”) and 0.188000015 of one common share purchase warrant (“Additional
Fractional Warrant”). Each Whole Warrant entitles the holder to purchase one
common share at a price of $0.71 per common share for a period of three years
from the date of closing. Each Additional Fractional Warrant entitles the holder
to purchase 0.188000015 of one common share at a price of $0.95 for a period of
three years from the date of closing. The Whole Warrants and the Additional
Fractional Warrants expire on August 14, 2011. The units were issued pursuant to
Regulation S under the 1933 Act.

On
October 31, 2008, we completed the second tranche of the private placement
partially completed on August 14, 2008. In connection with the second trance, we
sold to one subscriber 12,500,000 units at a price of $0.40 per unit, for total
gross proceeds of $5,000,000. Each unit is comprised of one (1) common share,
one (1) common share purchase warrant and 0.16 of one common share purchase
warrant (“Additional Fractional Warrant”). Each warrant entitles the holder to
purchase one (1) common share at a price of $0.60 per common share for a period
of three years from the date of closing. Each Additional Fractional Warrant
entitles the holder to purchase 0.16 of one common share at a price of $0.80 for
a period of three years from the date of closing. The warrants and the
Additional Fractional Warrants expire on October 31, 2011. The units were issued
pursuant to Regulation S under the Securities Act of 1933.

On
November 9, 2010, pursuant to two subscription agreements, our Company completed
two private placements to two investors (the “Subscribers”) of an aggregate of
29,285,713 units (“Units”) at a price of $0.07 per Unit, for total gross
proceeds of $2,050,000. Each Unit is comprised of one (1) common share and one
(1) common share purchase warrant. Each warrant entitles the holder to purchase
one (1) common share at a price of $0.105 for a period of three years from the
date of closing, provided that if the closing price of the common shares of the
Company on the principal market on which our shares trade is equal to or exceeds
$1.00 for thirty consecutive trading days, the warrant term shall automatically
accelerate to the date which is thirty calendar days following the date that
written notice has been given to the warrantholder. No commission or finder’s
fees were payable in connection with these private placements. The Units were
issued pursuant to Regulation S under the Securities Act of 1933, as amended.
The Company intends to use the majority of the net proceeds from the private
placements to conduct engineering, construction and other operations for its
recently approved CSS production test.

ITEM
6.

SELECTED
FINANCIAL DATA

We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
therefore are not required to provide the information required under this
item.

22

ITEM
7.

MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes. For the purpose of this
discussion, unless the context indicates another meaning, the terms: “Deep
Well,” “Company,” “we,” “us,” and “our,” refer to Deep Well Oil & Gas, Inc.
and its subsidiaries. This discussion includes forward-looking statements that
reflect our current views with respect to future events and financial
performance that involve risks and uncertainties. Our actual results,
performance or achievements could differ materially from those anticipated in
the forward-looking statements as a result of certain factors including risks
discussed in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Forward-Looking Statements” below and elsewhere in this
report, and under the heading “Risk Factors” and “Environmental Laws and
Regulations” disclosed in this report on Form 10-K for the fiscal year ended
September 30, 2010.

Our consolidated financial
statements and information are reported in U.S. dollars and are prepared based
upon United Statesgenerally accepted accounting
principles (“US GAAP”).

General
Overview

Deep Well
Oil and Gas, Inc. (“Deep Well”), along with its subsidiaries, is an emerging
independent junior oil and gas exploration and development company headquartered
in Edmonton, Alberta, Canada. Our Company’s immediate corporate focus is to
develop the existing land base that we presently control in the Peace River oil
sands area in Alberta, Canada. Our principal office is located at Suite 700,
10150 - 100 Street, Edmonton, Alberta, Canada T5J 0P6, our telephone number is
(780) 409-8144, and our fax number is (780) 409-8146. Deep Well Oil & Gas,
Inc. is a Nevada corporation and trades on the OTCQB marketplace under the
symbol DWOG. We maintain a web site at www.deepwelloil.com.

On April
21, 2010, we announced our quotation on the OTCQB marketplace. This graduation
from the “Pink Sheets – Current Information” tier recognizes the progress that
we have made in meeting our reporting requirements under the Securities Exchange
Act of 1934. The OTCQB is a new market that requires companies to be up to date
in their filing requirements under the Securities Exchange Act of
1934.

Results of Operations for
the Year Ended September 30, 2010

Deep Well
is an exploration stage company and as such does not have commercial production
on any of its properties and, accordingly, it currently does not generate cash
from operations. Since the inception of our current business plan, our
operations have consisted primarily of various exploration and start-up
activities relating to our properties, which included acquiring lease holdings
by acquisitions and public offerings, seeking investors, locating joint venture
partners, acquiring and analyzing seismic data, engaging various firms to comply
with leasehold conditions, environmental regulations as well as project
management, and developing our long term business strategies. For the year ended
September 30, 2010, and for the comparable period, we generated no revenues from
operations.

September 10, 2003

Year Ended

Year Ended

to

September 30, 2010

September30,2009

September30,2010

Revenue

$

–

$

–

$

–

Expenses

General
and Administrative

$

1,119,130

$

2,068,176

$

10,515,638

Amortization
and Accretion

217,605

146,261

379,906

Share
Based Compensation

–

5,802

923,142

Net
Loss from Operations

(1,336,735

)

(2,220,239

)

(11,818,686

)

Other
Income and Expenses

Rental
and Other Income

160

18,073

18,233

Interest
Income

5,023

34,826

206,072

Interest
Expense

–

(3

)

(208,580

)

Forgiveness
of Loan Payable

–

–

287,406

Settlement
of Debt

–

–

24,866

Loss
on Disposal of Asset

–

–

(510

)

Net
Loss and Comprehensive Loss

$

(1,331,552

)

$

(2,167,343

)

$

(11,491,199

)

23

Our net
loss and comprehensive loss for the year ended September 30, 2010 was $1,331,552
compared to a net loss and comprehensive loss of $2,167,343 for the year ended
September 30, 2009. This difference was due primarily to a decrease of $949,046
in general and administrative costs relating to a decrease in operating
expenses.

For the
year ended September 30, 2010, interest income decreased by $29,803, compared to
the year ended September 30, 2009, due primarily to not receiving interest from
term deposits the Company had in the prior year.

Operations

Deep
Well, through its subsidiaries Northern Alberta Oil Ltd. (“Northern”) and Deep
Well Oil & Gas (Alberta) Ltd., currently has an 80% working interest in 56
contiguous sections of oil sands leases and a 40% working interest in an
additional 12 contiguous sections of oil sands leases in the Peace River oil
sands area of Alberta, Canada. Our oil sands leases cover 43,015 gross acres
(17,408 gross hectares) of land.

Previously,
we successfully completed a drilling program and drilled 6 wells. In addition,
we have an interest in 3 horizontal wells, which were previously drilled by our
former farmout partner, and an interest in two wells the Company acquired. Since
then we have been evaluating the options for production available to us to
determine the best course of action. Drilling on 80% owned lands has opened new
avenues for testing and further development of the Sawn Lake project. The focus
of our drilling program was to define the heavy oil reservoir to establish
reserves and to determine the best technology under which oil can be produced
from the Sawn Lake project in order to initiate production and generate cash
flow.

In
September 2009, we submitted an application to the Energy Resources Conservation
Board (“ERCB”) for a commercial bitumen recovery scheme to evaluate the
12-14-092-13W5 well for potential development using Cyclic Steam Stimulation
(“CSS”) and later added the 6-22-092-13W5 well to the application. On October
14, 2010 this application was approved by the ERCB to conduct one CSS production
test one of the wells to evaluate the oil sands resource using this secondary
recovery technology. The Company has appointed Asher Engineering Ltd. to manage
the CSS project and construction, including procurement of all required
equipment.The
CSS process involves steam injection into a well for a period of up to 30 days,
potentially a ”soaking” period, followed by production of heavy oil for up to 50
days or more. This CSS production test is not only for the production of heavy
oil from the Blue Sky zone of the Sawn Lake project but it will also aid in
quantifying the Company’s oil reserves.

In July
2010, Chapman Petroleum Engineering Ltd. performed an independent technical
evaluation of the heavy oil properties on some of our Sawn Lake properties. The
report confirmed the suitability for thermal recovery methods. In addition,
Chapman Petroleum Engineering Ltd. identified a new hydrocarbon bearing zone
up-hole from the Bluesky zone presently being concentrated on by the Company.
This secondary heavy oil zone is in the Peace River formation. It is a clastic
unit of Lower Cretaceous age found at a shallower depth than the Bluesky. It is
approximately 35 meters thick and is a massive, very fine to medium grain
sandstone conformably deposited on the Harmon shale. The Company will continue
the development of the Bluesky reservoir and at the same time will evaluate this
newly discovered reservoir by coring future wells.

On
November 9, 2010 we secured two private placement financings for $2,050,000. The
Company intends to use the majority of the net proceeds from the private
placements to conduct engineering, construction and other operations for its
recently approved CSS production test.

The
Company has also appointed Pioneer Land and Environmental to proceed immediately
with the environmental studies mandated by Alberta Regulations before the
Company can embark on a five to seven well production pilot project as an
interim step toward full scale commercial production. The Company’s geological
studies lead it to conclude that its working interest can support full
commercial production. The Company is fully committed to best practices in
environmental stewardship to assure sustainable development of its in-situ heavy
oil holdings.

Liquidity and Capital
Resources

As of
September 30, 2010, our Company’s total assets were $13,923,747 compared to
$15,083,173 as of September 30, 2009, and our total liabilities as of September
30, 2010, were $564,410 compared with $392,284 as of September 30, 2009. The
decrease in our total assets was due primarily to a decrease in cash and
accounts receivable, including an $188,138.54 Cdn allowance for the money owed
to the Company by one of its joint venture co-owners. The Company is continuing
to pursue its remedies to collect these monies. The increase in our total
liabilities was primarily due to an increase in our asset retirement obligations
and accounts payable.Our working capital
(current liabilities subtracted from current assets) is as follows.

September 30, 2010

September 30, 2009

Current
Assets

$

386,018

$

2,032,025

Current
Liabilities

177,476

34,049

Working
Capital

$

208,542

$

1,997,976

24

As of
September 30, 2010, our Company had working capital of $208,542 compared to our
working capital of $1,997,976 as of September 30, 2009. Our working capital
decrease was due primarily to engineering expenses incurred for operations and
general corporate expenditures. Currently we have no long-term
debt.

Our cash
and cash equivalents for the year ending September 30, 2010 were $103,550
compared to $945,835 for the comparable year ending September 30, 2009. Since
March 10, 2005, we have financed our business operations through a loan, fees
derived from the farmout of some of our lands, private offerings of our common
stock, and the exercise of certain warrants, realizing gross proceeds of
approximately $21.6 million. In these offerings, we sold units comprised of
common stock and warrants to purchase additional common stock, and as a result
of these offerings, we currently have an aggregate of 57,462,810 warrants
outstanding with exercise prices ranging from $0.105 to $1.20. These warrants’
expiration dates range from August 14, 2011 to November 9, 2013. If all of these
warrants are exercised we may realize aggregate proceeds of approximately $22.9
million. However, the warrant holders have complete discretion as to when or if
the warrants are exercised before they expire and we cannot guarantee that the
warrant holders will exercise any of the warrants.

For our
long-term operations we anticipate that, among other alternatives, we may raise
funds during the next twenty-four months through sales of our common stock. We
also note that if we issue more shares of our common stock, our stockholders may
experience dilution in the percentage of their ownership of common stock. We may
not be able to raise sufficient funding from stock sales for long-term
operations and if so, we may be forced to delay our business plans until
adequate funding is obtained. We believe debt financing will not be an
alternative for funding our operations, as we are an exploration stage Company,
and due to the risky nature of our business.

Off-Balance Sheet
Arrangements

We do not
have any off-balance sheet arrangements.

Cautionary Statements for
Purposes of the Safe Harbor Provisions of the Private Securities Litigation
Reform Act

This
annual report on Form 10-K, including all referenced exhibits, contains
“forward-looking statements” within the meaning of the United States federal
securities laws. All statements other than statements of historical facts
included or incorporated by reference in this report, including, without
limitation, statements regarding our future financial position, business
strategy, projected costs and plans and objectives of management for future
operations, are forward-looking statements. The words "may," "believe,"
"intend," "will," "anticipate," "expect," "estimate," "project," "future,"
"plan," "strategy" or "continue," and other expressions that are
predictions of or indicate future events and trends and that do not relate to
historical matters, identify forward-looking statements. For these statements,
Deep Well claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements in this annual report on Form 10-K include, among
others, statements with respect to:

·

our
current business strategy;

·

our
future financial position and projected
costs;

·

our
projected sources and uses of cash;

·

our
plan for future development and
operations;

·

our
drilling and testing plans;

·

our
proposed enhanced oil recovery test well
project;

·

the
sufficiency of our working capital in order to execute our business
plan;

·

resource
estimates;

·

the
timing and sources of our future
funding.

Reliance
should not be placed on forward-looking statements because they involve known
and unknown risks, uncertainties, and other factors, which may cause the actual
results to differ materially from the anticipated future results expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those set forward in the forward-looking
statements include, but are not limited to:

·

changes
in general business or economic
conditions;

·

changes
in legislation or regulation that affect our
business;

·

our
ability to obtain necessary regulatory approvals and
permits;

·

our
ability to receive approvals from the ERCB for additional tests to further
evaluate or produce the wells on our
lands;

·

opposition
to our regulatory requests by various third
parties;

·

actions
of aboriginals, environmental activists and other industrial
disturbances;

·

the
costs of environmental reclamation of our
lands;

·

availability
of labor or materials or increases in their
costs;

25

·

the
availability of sufficient capital to finance our business plans on terms
satisfactory to us;

imprecision
in estimates of reserves, resources and recoverable quantities of oil and
natural gas;

·

product
supply and demand;

·

fluctuations
in currency and interest rates; and

·

the
additional risks and uncertainties, many of which are beyond our control,
referred to elsewhere in this annual report on Form 10-K and in our other
SEC filings.

The
preceding bullets outline some of the risks and uncertainties that may affect
our forward-looking statements. For a full description of risks and
uncertainties, see the sections elsewhere in this annual report on Form 10-K
entitled “Risk Factors” and “Environmental Laws and Regulations”. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, believed, estimated or expected. Any forward-looking statement
speaks only as of the date on which it was made and, except as required by law,
we disclaim any obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. However, any
further disclosures made on related subjects in subsequent reports on Forms
10-K, 10-Q, 8-K and any other SEC filing should be consulted.

26

ITEM
7A.

QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

We are a
smaller reporting company as defined by Rule 12b-2 under the Exchange Act and
therefore are not required to provide the information required under this
item.

To the
Board of Directors and Stockholders of Deep Well Oil & Gas, Inc. and
Subsidiaries (an Exploration Stage Company) We have audited the accompanying
consolidated balance sheets of Deep Well Oil & Gas, Inc. and Subsidiaries
(an Exploration Stage Company) (the Company) as of September 30, 2010 and 2009,
and the related consolidated statements of operations, stockholders’ equity, and
cash flows for each of the years in the three-year period ended September 30,
2010, and for the period from September 10, 2003 (date of inception) to
September 30, 2010. The Company’s management is responsible for these
consolidated financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of Deep Well Oil & Gas, Inc. and
Subsidiaries (an Exploration Stage Company) as of September 30, 2010 and 2009,
and the consolidated results of its operations and its cash flows for each of
the years in the three-year period ended September 30, 2010, and for the period
from September 10, 2003 (date of inception) to September 30, 2010 in conformity
with accounting principles generally accepted in the United States of
America.

Madsen
& Associates CPA’s, Inc.

Murray,
UT

December
23, 2010

28

DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)

(Exploration
Stage Company)

Consolidated
Balance Sheets

September
30, 2010 and September 30, 2009

September30,

2010

September30,

2009

ASSETS

Current
Assets

Cash
and cash equivalents

$

103,550

$

945,835

Accounts
receivable

195,751

990,239

Prepaid
expenses

86,717

95,951

Total
Current Assets

386,018

2,032,025

Long Term Investments
(Note 5)

247,473

77,036

Oil and gas properties
(Note 3)

12,726,396

12,221,352

Property & equipment net of
depreciation (Note 4)

563,860

752,760

TOTAL
ASSETS

$

13,923,747

$

15,083,173

LIABILITIES

Current
Liabilities

Accounts
payable

$

42,147

$

34,049

Accounts
payable – related parties (Note 6)

86,774

–

Deposits
on stock subscription (Note 7)

48,555

Total
Current Liabilities

177,476

34,049

Asset retirement
obligations (Note 8)

386,934

358,235

TOTAL
LIABILITIES

564,410

392,284

SHAREHOLDERS’
EQUITY

Common stock: (Note
9)

Authorized:
300,000,000 shares at $0.001 par value

Issued
and outstanding: 106,774,258 shares

(September 2009 – 106,774,258
shares) (Note 9)

106,773

106,773

Additional
paid in capital

24,743,763

24,743,763

Deficit
accumulated during exploration stage

(11,491,199

)

(10,159,647

)

Total
Shareholders’ Equity

13,359,337

14,690,889

TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY

$

13,923,747

$

15,083,173

See
accompanying notes to the consolidated financial statements

29

DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)

(Exploration
Stage Company)

CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For
the Years Ended September 30, 2010, 2009 and 2008 and the Period from September
10, 2003

(Inception
of Exploration Stage) to September 30, 2010

2010

2009

2008

September 10,

2003 to

September 30,

2010

Revenue

$

–

$

–

$

–

$

–

Expenses

General
and Administrative

1,119,130

2,068,176

2,769,379

10,515,638

Depreciation
and accretion

217,605

146,261

13,706

379,906

Share
based compensation

–

5,802

111,815

923,142

Net
loss from operations

(1,336,735

)

(2,220,239

)

(2,894,900

)

(11,818,686

)

Other
income and expenses

Rental
and other income

160

18,073

–

18,233

Interest
income

5,023

34,826

100,070

206,072

Interest
expense

–

(3

)

(715

)

(208,580

)

Forgiveness
of loan payable

–

–

–

287,406

Settlement
of debt

–

–

–

24,866

Loss
on disposal of asset

–

–

(510

)

(510

)

Net
loss and comprehensive loss

$

(1,331,552

)

$

(2,167,343

)

$

(2,796,055

)

$

(11,491,199

)

Net
loss per common share

Basic
and Diluted

$

(0.01

)

$

(0.02

)

$

(0.03

)

Weighted
Average Outstanding Shares (in thousands)

Basic
and Diluted

106,774

105,713

85,002

See
accompanying notes to the consolidated financial statements

30

DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)

(Exploration
Stage Company)

CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY

For
the Period from September 10, 2003 (Inception of Exploration Stage) to September
30, 2010

Capital

Additional

Stock

Common Shares

Paid in

Subscriptions

Accumulated

Shares

Amount

Capital

Received

Deficit

Total

Balance
at September 10, 2003

991,918

$

992

$

(992

)

$

–

$

–

$

–

Issuance
of common stock pursuant to bankruptcy agreement September 10,
2003

36,019,556

36,019

13,981

–

–

50,000

Net
operating loss for the period September 10 to September 30,
2003

–

–

–

–

(50,000

)

(50,000

)

Balance
at September 30, 2003

37,011,474

37,011

12,989

–

(50,000

)

–

Return
and cancellation of common shares

(5,775,000

)

(5,775

)

5,775

–

–

–

Net
operating loss for the year ended September 30, 2004

–

–

–

–

(525,754

)

(525,754

)

Balance
at September 30, 2004

31,236,474

31,236

18,764

–

(575,754

)

(525,754

)

Issuance
of common stock

Private
placement March 10, 2005

-
Shares

1,875,000

1,875

527,940

–

–

529,815

-
Warrants (787,500)

–

–

205,185

–

–

205,185

Share
exchange June 7, 2005

-
Shares

18,208,875

18,209

2,476,497

–

–

2,494,706

-
Conversion rights of preferred shares of subsidiary

–

–

–

1,777,639

–

1,777,639

Private
placement August 12, 2005

-
Shares

710,946

711

151,638

–

–

152,349

-
Warrants (710,946)

–

–

132,030

–

–

132,030

Common
stock subscription received

–

–

–

250,000

–

250,000

Net
operating loss for the year ended September 30, 2005

–

–

–

–

(1,262,549

)

(1,262,549

)

Balance
at September 30, 2005

52,031,295

52,031

3,512,054

2,027,639

(1,838,303

)

3,753,421

See
accompanying notes to the consolidated financial statements

31

DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)

(Exploration
Stage Company)

CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)

For
the Period from September 10, 2003 (Inception of Exploration Stage) to September
30, 2010